All legal matters (contract, earnest money escrow, title search, closing) to be advised and handled by a local Notario Publico office of the buyer's choosing.
Notario Publicos in Mexico are special, government-appointed attorneys, charged with handling real estate transactions in a manner fair to both sides. They conduct the title search, acquire the foreign-ownership permit, and set up the foreign-ownership trust for the buyer.
For a complete discussion on the foreign-ownership trust system in Mexico (fideicomiso), click on this explanatory article in The People's Guide To Mexico: ARTICLE - BUYING COASTAL PROPERTY
The process takes about six weeks, on average, from signing of the sales contract to day of closing. Buyer need not necessarily be present at closing. Buyer may appoint a representative to act in his/her behalf if desired.)
There are several Notario offices with English-speaking attorneys on staff. We can help you set up appointments with one of these if you like.
THE PRELIMINARY PURCHASE AGREEMENT (SALES CONTRACT)
To best protect the interest of all concerned it is ideal (although technically not required) to have the purchase contract drawn and witnessed by a Notario Publico. This contract is called a Compraventa Definitiva, and will specify all the particulars of the deal as agreed upon by the two parties. It will likely stipulate penalties if either party fails to perform. At the time this contract is signed, a deposit (the equivalent of earnest money) of at least 10% of the purchase price is customary. It should be made in guaranteed funds. (A cashier's check in dollars drawn on a US bank, for example.)
LENDERS and MORTGAGE AVAILABILITY
In Mexico, mortgages are only beginning to be used, and are still rare. The vast majority of real estate purchases in Mexico do not involve mortgage loans. A few US lenders are now making dollar-based loans on Mexican properties to US citizens. Rates, however, are fairly high, but this is an option for some, at least as a means of making a purchase, until a better source of funds is found.
In Mexico, seller pays realtor fees, if any, plus Mexican capital gains tax, if any. Buyer pays Notario Publico fees, foreign-ownership permit, tax appraisal fee, deed registration fee, first year's trust fee, etc. Total buyer's closing costs usually run from 5% to 7% of purchase price.
ANNUAL FIDEICOMISO (foreign-ownership trust) FEE:
$500-$700 US approximately.
INTERNATIONAL FUNDS TRANSFER OPTIONS:
Funds for deposit are generally in the form of a cashier's check. At times, the deposit may be accepted on a temporary basis in the form of a personal check, to be replaced within a short time (usually ten days) by guaranteed funds (bank check, cashier's check, or funds wired into a special temporary Mexican bank escrow/trust account set up by the buyer.
Funds for the balance due at closing may be in the form of a US bank, Canadian bank (or Mexican bank) cashier's check you hand deliver at closing; if you cannot attend the closing, funds may be pre-wired by you into one of the aforementioned Mexican bank escrow accounts, set up specifically to release the funds only for the closing transaction. If you can attend the closing this will not be necessary, of course.
In most (but not all) cases, contracts are in US dollars and your US dollar cashier's check fulfills the contract terms. Whether payment is acceptable in pesos, dollars, Canadian dollars, etc., and the manner of determining a fair exchange rate (if necessary) on the day of closing, will all have been specified in the original purchase contract...the Compraventa Definitiva. This is just one example of why a Notario prepared purchase contract is advisable. There are many details to be agreed upon by both parties in an international real estate transaction.
Mexico does not have an escrow system similar to those in the US and Canada. Strictly speaking, a special temporary trust account for escrow purposes may be set up with any local Mexican bank. This is costly and time-consuming however.
More practically, some Notarios will act as an informal escrow, and hold, for example, the deposit check in their vault while the deal is pending. We can advise you as to which Notarios provide this very helpful service and which do not.
U.S. - style title insurance is now available through Stewart Title Guaranty Company. However, many here view it as unecessary; the Notario does a routine title examination as part of the fideicomiso process; consequently, many feel that purchasing additional title insurance is a waste of money. Still, if it gives you added peace of mind, it's an option.
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